Week 8 FX trading results

I returned 4.3% last week, bringing my end of month balance to £9600. I score myself 7.5 out of 10 for following the road map, but the reality is that the going is getting tougher. In this light, the decision to cut back on the aggressiveness of my trades appears to have been a prudent one.

When I started writing this blog, my aim was to get back to break-even by April 2007, but I realise this is increasingly unlikely with my current strategy, and I can ill afford to start experimenting with new approaches. I find myself on an unexpected path as I planned to either achieve break-even or to die (financially) trying. Instead, I have landed somewhere in between. My edge has fizzled out, at least for now, and I have a little capital which I am trying hard to preserve. What these weeks of profitability have brought me is precious time to find new ways of earning some coin should my edge fail to return. Based on past expenditures I estimate I have enough funds to last anywhere between 3 to 6 months before I am forced in to a corner of desperation.

The trading journey continues, but the frequency of my trades is being significantly reduced as I am narrowing my focus on the more potentially profitable trades. Because weekly results will be less meaningful in this context, from here on I will be reporting my trading results on a monthly basis. At least this effective ending of a chapter of my trading life neatly coincides with the end of the calendar year.

You’re doing great. Not all edges fade away, and perhaps you don’t need to stress over it so much. Look at Mark Fisher’s ACD method from “The Logical Trader”, the method is widely known and it’s been more than 2 years since the book was published. A friend who trades on the NYMEX mentioned that they still trade this method profitably, that means perhaps edges from our strategies last longer than most of us would fear.

Thanks Rocko and mc. I am also impressed by the numbers since I started this blog but I know from the recent results of my individual trades that all is not well with my approach. Because of this I have decided to put a halt to my wild ways. If the strategy proves its worth in the weeks ahead it will be rewarded with more capital, but for now I am taking a more conservative approach. I could look back with a sense of regret, thinking of what may have been had I achieved these percentage results when my capital was whole, but this is an ill use of hindsight; I can’t be sure but I believe this positive run most probably wouldn’t have happened if I hadn’t had those horrid losses in the first place. I believe the numbers are a product of the journey.

I have never looked at Fisher’s ACD method, but I have heard of the chap and I find it interesting that his strategy still seems to hold after publication. If the method it is open to subjective interpretation, then the success may may be attributable to the individual trader (Rocko’s friend), but if the strategy is highly prescriptive I would be sceptical of the results. That is to say, I believe that publishing a profitable but highly prescriptive strategy will quickly make it unprofitable as this information is absorbed in to the market. You could liken it to entering a military campaign and faxing your battle strategy across to your enemy. That’s not to say the strategy won’t ever work again, just that it will no longer make ‘supernormal’ profits over the long-term (i.e. if you take all published, systematic strategies and forward test them a handful of them will likely make decent profits but this could be down to chance). I try to acknowledge the role of chance in my own approach – because my approach is not an arbitrage strategy (often close to risk-free), I know chance is there. It is the great unknown.